As Senate campaign heats up, Giannoulias family races to avoid collapse of its bank

During Alexi Giannoulias' tenure at Broadway, the bank approved loans to Giorango for various real estate deals. Alexi Giannoulias has acknowledged he serviced some Giorango loans and went to Miami to inspect Giorango property the bank financed.

Giorango is likely to play a role in the coming months. One of Broadway's more recent cases, filed in Cook County, was in June against Giorango and other business partners involving a $2.2 million foreclosure of a building at 1201-1205 S. Western Ave.

Giorango declined to comment through an attorney.

In December, the bank entered into a deed-in-lieu-of-foreclosure agreement, basically taking back the property, court records show.

Demetris Giannoulias, a Yale University economics and sociology graduate, said one of the few options for Broadway Bank to raise money is through private-equity firms.

But that won't be easy. For one thing, many private-equity firms won't bother doing deals of less than $100 million, he said. For another, banking regulations make it unappealing for private-equity firms to take more than, say, a 25 percent ownership stake. Exceeding that threshold would force such firms to register as bank holding companies. That would open up a typically secretive industry to more scrutiny in the highly regulated banking world.

A purchase of Broadway by another bank is virtually off the table, Demetris Giannoulias said. That's because many healthy banks believe it makes more sense to wait until a lender fails before swooping in for the deposits, assets and branches. That way, the acquiring bank can usually strike a deal with the Federal Deposit Insurance Corp. that limits its losses.

Also, with only four branches, including its 5960 N. Broadway headquarters, Broadway has scant franchise value, providing little incentive for another institution to fashion a deal before its collapse.

During 2007 and 2008, Broadway paid the family about $70 million in dividends. Is the family in a position to bail the bank out?

Demetris Giannoulias said most of the money was used to pay corporate taxes and for estate planning after the 2006 death of family's patriarch, Alexis Giannoulias. Even after the dividends, the bank was still well capitalized, he said.

As recently as June 2008, "we still felt things were going OK," Demetris Giannoulias said. "When we made the dividend, we still thought our income would be up."

After the U.S. financial crisis began in late 2008, the Treasury Department rolled out the Troubled Asset Relief Program, commonly known as the bank bailout program. Broadway considered applying but didn't.

"We had enough capital" at the time, Demetris Giannoulias said

Now, many troubled banks are seeking help from legislators. But Demetris Giannoulias realizes he's in an awkward spot.

"It's a little delicate with my brother," he said. "I stay up at night thinking of what I'd tell someone."

In retrospect, Demetris Giannoulias wishes that Broadway had made no loans in 2007 or 2008.

"I wish I would have locked the doors," he said. "I'd be sitting pretty now."